CBAM: Carbon Border Adjustment Mechanism
I. Definition
CBAM (Carbon Border Adjustment Mechanism) is a regulatory mechanism designed to address carbon emissions linked to imported goods.
It applies a carbon-related cost to certain products entering the European Union.
The goal of CBAM is to align imported products with climate requirements applied to EU producers.
II. Context
The CBAM is part of the European climate policy framework.
It focuses on sectors with high carbon emissions and international trade exposure.
Companies importing goods into the EU must:
- measure the carbon emissions of their products,
- report this information regularly,
- prepare for carbon-related financial obligations.
The CBAM encourages transparency and supports climate objectives.
It also connects with broader sustainability reporting requirements.
Companies affected by CBAM often need to align their data with:
- CSRD sustainability reporting,
- climate disclosures under ISSB,
- emission reduction strategies such as SBTi.
III. Related terms
- CSRD: Corporate Sustainability Reporting Directive
https://www.orizscore.com/blogs/csrd-corporate-sustainability-reporting-directive - SBTi: Science Based Targets Initiative
https://www.orizscore.com/blogs/sbti-science-based-targets-initiative - ISSB: IFRS S1 and S2 Global Standards
https://www.orizscore.com/blogs/issb-ifrs-s1-s2-global-standards - GRI: Global Reporting Initiative Mapping
https://www.orizscore.com/blogs/gri-standards-mapping-csrd
IV. Example
A company imports steel products into the EU.
Under CBAM, it must report the carbon emissions linked to these imports.
This data is also used to:
- support CSRD sustainability reporting,
- align climate information with ISSB standards,
- connect emission data with SBTi targets.
As a result, the company improves transparency and regulatory alignment.
